Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 17, Problem 6E
To determine
The practice of truthful advertisement and the market competition.
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Everything else held constant, when a producer advertises the goal is to
Decrease the public’s desire and decrease the demand for their product
Decrease the public’s desire and increase the demand for their product
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Increase the public’s desire and reduce the demand for their product
Demonstrate graphically why persuasive advertising which makes consumers more loyal
Demonstrate graphically why persuasive advertising, which makes consumers more loyal to the advertised brand, is likely to increase a firm’s market power (its ability to raise price above marginal cost). Will it necessarily increase profit as well?
Demonstrate graphically why persuasive advertising which makes consumers more loyal
Advertising is often described as wasteful and useless for consumer. Focusing on what you learned about asymmetric information and price dispersion, is there an economic rationale for advertising? Are there characteristics of certain types of goods that would make advertising information regarding these goods particularly useful to consumer?
Chapter 17 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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- Focusing on what you learned about asymmetric information and price dispersion, is there an economic rationale for advertising? Are there characteristics of certain types of goods that would make advertising information regarding these goods particularly useful to consumer?arrow_forwardTrue or False: Popular online publications that have no close substitutes will be more likely to be able to charge for those publications than will a local newspaperarrow_forwardDoes a monopolistic competitor produce too much or too little output compared to the most efficientlevel ? What practical considerations make it difficult for policymakers to solve this problem?arrow_forward
- Which of the following is not ever considered a cost of advertising from society's perspective? Decreased government revenue Waste of resources Misleading of vulnerable people Decreased competitionarrow_forwardDecide whether the statement is True, False, or Uncertain, and give a brief explanation. A car rental company has been issuing coupons on the internet. Since the coupons are accessible to the general public, they cannot be a form of price discrimination.arrow_forwardSuppose, Pfizer Company is the only company allowed by the Sultanate government to sell COVID vaccine in Oman. According to you, what type of market Pfizer Company is having in Oman? a. Monopoly market b. Monopolistic market c. Competitive market d. Oligopoly marketarrow_forward
- A firm that sells coffee is a monopolist in a small market. The firm wants to start selling another good, in which it will be a monopolist as well. There are two options: sugar and tea. Both have the same marginal costs. Which of the two should the firm choose to sell along with coffee and why? Would your answer change if the choice was between sugar and shampoo? (Assume that sugar and shampoo have the same marginal cost as well).arrow_forwardWhat is meant by the term “market power”? Can a monopolist charge any price it wants because it is the only seller? What is the profit maximizing /loss minimizing rule a firm should follow regardless of the market structure within which the firm is operating? If the monopolist is incurring a short run economic loss, what are some options the monopolist has?arrow_forwardWhich of the following statements about expenditures on advertising is true? If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising. When a firm spends a small amount of money on advertising, this signals that the quality of the good is high. When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality. Read the following example and determine whether it illustrates a common critique or defense of advertising. Gilberto sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't particularly need new clothes, the commercial prompts him to buy a Brand X t-shirt. This illustrates a common of advertising.arrow_forward
- A company can successfully charge different prices in country A and B. Marginal cost is $10. Demands in country A and B are Q=20.5-P and Q=5-P respectively. What are the profit- maximising prices in two countries? What quantity do they sell in two countries? The company now added country C, and its demand is Q=20.5-P. What maximising prices do they charge in three countries? What quantity do they charge in three countries?arrow_forwardFirm 1 and Firm 2 are in a duopoly, earning each annual profits of £10 million per year. Firm 1 could earn £20 million per year as a monopolist. Firm 1 drops its price to £40 when its marginal cost is £50 and holds it there for a year to be able to drive Firm 2 out of the market. The year that it drops its price, Firm 1 will lose £10 million. At what level of interest rate i will the strategy of Firm 1 be profitable?arrow_forwardThe following graph illustrates Demand, Marginal Revenue and cost curves for GeneTech firm which produces vaccine. In which market structure is this firm operating, monopoly or Perfect competition? How do you know? How many vaccines should GeneTech produce to maximize its profit? How do you know? Explain your answer. What price should GeneTech charge for its vaccine to maximize its profit?arrow_forward
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